MacDonald Humfrey (Automation) Limited - Limited company accounts 18.2

REGISTERED NUMBER: 02263923 (England and Wales)

MACDONALD HUMFREY (AUTOMATION) LIMITED

GROUP STRATEGIC REPORT,

REPORT OF THE DIRECTORS AND

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31ST DECEMBER 2018

Page

Company Information

1

Group Strategic Report

2

Report of the Directors

5

Independent Auditors' Report

9

Consolidated Statement of Comprehensive Income

12

Consolidated Balance Sheet

14

Company Balance Sheet

15

Consolidated Statement of Changes in Equity

16

Company Statement of Changes in Equity

17

Consolidated Cash Flow Statement

18

Notes to the Consolidated Financial Statements

19

DIRECTORS:

Mr A E Crawford

Mr A Yeager

Mr J R Davenport

Mr J A Comery

Mr A Dallsingh

REGISTERED OFFICE:

Progress Manor

29-35 Bolton Road

Luton

Bedfordshire

LU1 3HY

REGISTERED NUMBER:

02263923 (England and Wales)

AUDITORS:

PricewaterhouseCoopers LLP

Chartered Accountants and Statutory Auditors

3 Forbury Place

23 Forbury Road

Reading

RG1 3JH

The directors present their strategic report of the company and the group for the year ended 31st December 2018.

REVIEW OF BUSINESS

The directors aim to present a balanced and comprehensive review of the development and performance of the

business during the year and its position at the year end. The review is consistent with the size and nature of the

business and is written in the context of the risks and uncertainties it faces.

The group operates from six UK locations: Luton, Ellesmere Port, Droitwich Spa, Birmingham, Oxford and

Wickford; and three overseas locations: Abu Dhabi UAE, Pune India and Singapore. Its principal market sectors

are automotive, airports, aerospace, logistics, process and petrochemical.

The activities of the group have consisted of the following elements: computer systems engineering, computer

software development, SCADA & Ml system development, industrial PLC systems software development,

electrical engineering design, CAD systems, simulation & emulation software, control panel manufacture &

assembly, project management, site planning, site management, site installation, system commissioning, system

support, system training, emergency technical support all year round, operate and maintain contracts, mechanical

design engineering, full mechanical manufacturing and assembly of a wide range of mechanical handling

equipment inclusive of overhead chain transportation conveyors, overhead electromotive systems, powered trolley

systems, inverted transport conveyors, roller bed transportation systems, floor conveyors of all definitions,

automated guided vehicle systems, crane storage systems, as well as specialist bespoke material handling

equipment.

MacDonald Humfrey (Automation) Limited and its subsidiaries are wholly owned by L3Harris Technologies, Inc

which was formed following the merger of L3 Technologies, Inc and Harris Corporation.

The business of MacDonald Humfrey (Automation) Limited continues to show opportunities for growth within the

airports sector as it benefits from being part of the international platform within the L3Harris Technologies, Inc

group.

As well as automotive, other sectors such as aerospace, logistics, process, food and beverage and nuclear offer

further potential growth opportunities for the business.

Exmac Automation Limited

Exmac Automation Limited is a 100% owned subsidiary company of MacDonald Humfrey (Automation) Limited,

based in Droitwich in the West Midlands.

Exmac Automation Limited, is recognised as one of the leading Design Engineering & Manufacturing Companies

in the UK.

The key market sectors of Exmac Automation Limited are automotive, logistics, aerospace and general

manufacturing.

Following a reasonable performance in 2018, growth in these markets is expected to be achieved in the future.

REVIEW OF BUSINESS - continued

MacDonald Humfrey Automation Middle East Control Systems LLC

MacDonald Humfrey Automation Middle East Control Systems LLC is currently servicing a key airport project in

the UAE.

The progress of the business during 2018 has been in line with expectations and is seen as a valuable resource and

support centre for future projects in the region.

MacDonald Humfrey (Automation) SEA Pte. Limited

MacDonald Humfrey (Automation) SEA Pte. Limited in Singapore has continued to support a key client and has

established firmer relationships with airports in the region that have shown interest in the Mach-Secure product

range.

The progress of the business during 2018 has been in line with expectations.

MacDonald Humfrey (Automation) India Private Limited

MacDonald Humfrey (Automation) India Private Limited was established in India during 2016 in order to develop

local airports business and establish further software engineering resources for the group. Progress is being made

in winning local business and the build-up of resources continues.

C. K. Industrial Engineers Limited

C. K. Industrial Engineers Limited was acquired on 18th September 2018. The principal activity is the design and

manufacture of automotive tooling for large automotive manufacturers. These products and knowhow serve a

strong niche segment in the automotive manufacturing market and strategically compliment the group's product

offering, the combination of which is expected to support growth and opportunities.

Key performance indicators

The directors consider the key financial performance indicators to be those that communicate the financial

performance and strength of the group as a whole, these being turnover, gross profit and return on capital

employed.

Development and financial performance during the year

Group turnover of £91.5 million increased by 32.4% and gross profit of £31.6m increased by 39.2% (gross

profit% 34.5% compared to 32.9% last year). This reflects good growth predominantly in automotive, and a small

contribution from the post-acquisition period of C. K. Industrial Engineering Limited's results consolidated for the

first time. The improvement in gross profit% reflects predominantly the release of a specific provision no longer

required for a key airport project. This has resulted in operating profit of £18.3 million, 38.1% higher than last

year. The return on capital employed remained stable at 38.7% compared to 40.7% reflecting the above, along

with profitable trading building the capital employed base and no dividend distributions. Return on capital

employed is calculated as operating profit divided by capital employed which constitutes total assets less current

liabilities.

Financial position at the reporting date

The balance sheet shows that the group's net assets at the year-end increased from £32.6 million to £47.3 million.

The main reason for the increase was strong profitable trading during the year with no dividend distributions. The

group generated cash from operations of £4.1 million during the year. The fluctuation in cash from operation is

due to the stage payment nature of contracts not aligning with the stage of completion used to recognise profit.

PRINCIPAL RISKS AND UNCERTAINTIES

Management continually monitor the key risks facing the group together with assessing the controls used for

managing these risks. The board of directors reviews and documents the principal risks facing the business at least

annually.

The principal risks and uncertainties facing the group are as follows:

The group sells into markets around the world and as such there is a potential risk that changes in the global

macro-economic environment could impact the group's results.

The group is exposed to fluctuations in exchange rates with reference to countries in which it sells and buys.

When dealing with large foreign country projects the group evaluates the risk at the time of order placement and

takes an informed decision with regards to the introduction of a financial currency protection instrument.

The group does not anticipate that Brexit will have a significant impact on the future of the business.

ENVIRONMENTAL AND SOCIAL RESPONSIBILITIES

The group recognises its environmental and social responsibilities and understands the importance of the

contribution the group can make and has implemented policies in order to assist it in monitoring its impact on the

environment and to reduce any damage that might be caused by the group's activities.

Continuous improvement in environmental conditions and the reduction and disposal of waste play a major part in

the systems we design and implement for our clients. These systems range from major initiatives such as

intelligent load sharing to simple in-house initiatives regarding waste disposal.

All of the group's environmental policies are monitored and evaluated on a regular basis in line with ISO 14001

Certification procedures.

In addition to the environmental policies that the group has established, it has also set policies regarding its social

responsibility and specifically its responsibility to the local community.

ON BEHALF OF THE BOARD:

Mr J A Comery - Director

30th September 2019

The directors present their report with the audited financial statements of the company and the group for the year

ended 31st December 2018.

PRINCIPAL ACTIVITY

The principal activity of the company and the group is focused around systems integration and offering clients a

full turnkey service from top end computer systems through to shop floor implementation and full service support.

DIVIDENDS

No dividends will be distributed for the year ended 31st December 2018.

RESEARCH AND DEVELOPMENT

Developing solutions to meet our customers' needs in 2018 resulted in further Smart innovative technology-based

products being released to market across our customer base.

Products utilising cutting edge technology in 2019 will see the group create further disruption in its market sectors

with first of types of deployment embracing industry 4.0.

FUTURE DEVELOPMENTS

The directors consider 2019 to be an exciting year for growth and opportunities both within the domestic market

and worldwide through the global reach of the L3Harris Technologies, Inc group.

On 18th September 2018 the group acquired the entire share capital of C. K. Industrial Engineers Limited whose

principal activity is the design and manufacture of automotive tooling for large automotive manufacturers. These

products and know how serve a strong niche segment in the automotive manufacturing market and strategically

compliment the group's product offering, the combination of which is expected to support growth and

opportunities.

The continuing investment within India with the new Pune office firmly established, is expected to lead to further

growth and opportunities in the future.

The forecast success anticipated for the Indian market is to be replicated in the Asia Pacific region where there is

an increased awareness and desire for similar services and products.

DIRECTORS

The directors shown below have held office during the whole of the period from 1st January 2018 to the date of

this report.

Mr A E Crawford

Mr A Yeager

Other changes in directors holding office are as follows:

Mr P-K Chin - appointed 19th July 2018

Mr T Ripp - resigned 19th July 2018

Mr J R Davenport , Mr J A Comery and Mr A Dallsingh were appointed as directors after 31st December 2018 but
prior to the date of this report.

Mr M W J MacDonald , Mr P-K Chin , Mr M Simon and Mr R Cook ceased to be directors after
31st December 2018 but prior to the date of this report.

FINANCIAL INSTRUMENTS

Treasury operations and financial instruments

The group, at its level, operates a centralised treasury function which is responsible for managing the liquidity,

interest and foreign currency risks associated with the group's activities.

The group's principal financial instrument is the bank account, which provides working capital for the group's

operations. In addition, the group has various other financial assets and liabilities such as trade receivables and

trade payables arising directly from its operations.

Liquidity Risk

The group manages its bank balances centrally to maximise interest income and minimise interest expense and

ensures that the group has sufficient liquid resources to meet the operating needs of its business.

Interest Rate Risk

The group is exposed to cash flow interest rate risk on its floating rate deposits. The treasury function regularly

monitors the fluctuations in rates available and achieved in order to minimise this risk.

Foreign Currency Risk

The group's principal foreign currency exposures arise from trading with overseas companies. Group policy is to

maintain foreign currency bank accounts and convert foreign currency to sterling when rates are favourable. When

dealing with large foreign country projects the group evaluates the risk at the time of order placement and takes an

informed decision with regards to the introduction of a financial currency protection instrument.

Credit Risk

All customers who wish to trade on credit terms are subject to credit verification procedures. Receivable balances

are monitored on an ongoing basis and provision is made for doubtful debts where necessary.

EMPLOYMENT OF DISABLED PERSONS

Group policy is to give full and fair consideration to applications for employment made by disabled people,

having regard to their particular aptitudes and abilities.

Disabled employees receive appropriate training to promote their career development within the group.

EMPLOYEE INVOLVEMENT

Employee involvement is seen as a key factor in the success of the group business.

Employees are actively encouraged to become involved in all aspects of the business and to participate fully in

meaningful discussions regards methods of working, health and safety and any environmental issues they may

recognise.

Any concerns or employment issues raised by individual members of staff are addressed by their immediate line

manager with regular meetings and support from the Human Resource Administrator.

Employees are kept informed about the progress and position of the group by means of departmental meetings and

internal staff communications.

Promotion from within is one of the core principles of the group and all staff members are encouraged to progress

at every opportunity.

Last year a new internal training department had been established with the employment of a full-time training

manager.

The new department has been developed to include a specialist training classroom, housing dedicated training

PODS for 20 employees at a time. Specialist training modules include high level systems software, PLC, SCADA

software, robot programming and specialist CAD training. There are 28 technical trainees.

The health, safety and wellbeing of all staff is a key component of the group strategy and MacDonald Humfrey

(Automation) Limited employs a Chartered Health and Safety Manager and is also a member of the British Safety

Council. MacDonald Humfrey (Automation) Limited undertakes internal and external monitoring of its health and

safety procedures in line with the company's BS OHSAS 18001:2007 certification.

POST BALANCE SHEET EVENT

Effective 29th June 2019, L3 Technologies, Inc merged with Harris Corporation, Inc to form L3Harris

Technologies, Inc which is now the ultimate parent undertaking and controlling party of MacDonald Humfrey

(Automation) Limited.

On 1st October 2019, the company intends to change its name from MacDonald Humfrey (Automation) Limited

to L3Harris Automation Limited.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

The directors are responsible for preparing the Group Strategic Report, the Report of the Directors and the

financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare financial statements for each financial year. Under that law the

directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted

Accounting Practice (United Kingdom Accounting Standards and applicable law), including Financial Reporting

Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company

law the directors must not approve the financial statements unless they are satisfied that they give a true and fair

view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In

preparing these financial statements, the directors are required to:

-	select suitable accounting policies and then apply them consistently;

-	make judgements and accounting estimates that are reasonable and prudent;

-	state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

-	prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the

company's and the group's transactions and disclose with reasonable accuracy at any time the financial position of

the company and the group and enable them to ensure that the financial statements comply with the Companies

Act 2006. They are also responsible for safeguarding the assets of the company and the group and hence for taking

reasonable steps for the prevention and detection of fraud and other irregularities.

STATEMENT AS TO DISCLOSURE OF INFORMATION TO AUDITORS

So far as the directors are aware, there is no relevant audit information (as defined by Section 418 of the

Companies Act 2006) of which the group's auditors are unaware, and each director has taken all the steps that he

ought to have taken as a director in order to make himself aware of any relevant audit information and to establish

that the group's auditors are aware of that information.

ON BEHALF OF THE BOARD:

Mr J A Comery - Director

30th September 2019

Opinion

In our opinion, MacDonald Humfrey (Automation) Limited's group financial statements and company financial

statements (the "financial statements"):

-

give a true and fair view of the state of the group's and of the company's affairs as at 31 December 2018
and of the group's profit and cash flows for the year then ended;

-

have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, comprising FRS 102 "The Financial Reporting Standard
applicable in the UK and Republic of Ireland", and applicable law); and

-

have been prepared in accordance with the requirements of the Companies Act 2006.

We have audited the financial statements, included within the Group Strategic Report, Report of the Directors and

Consolidated Financial Statements (the "Annual Report"), which comprise: the consolidated and company balance

sheets as at 31 December 2018; the consolidated statement of comprehensive income, the consolidated cash flow

statement, and the consolidated and company statements of changes in equity for the year then ended; and the

notes to the financial statements, which include a description of the significant accounting policies.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and

applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors' responsibilities for the

audit of the financial statements section of our report. We believe that the audit evidence we have obtained is

sufficient and appropriate to provide a basis for our opinion.

Independence

We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of

the financial statements in the UK, which includes the FRC's Ethical Standard, and we have fulfilled our other

ethical responsibilities in accordance with these requirements.

Conclusions relating to going concern

ISAs (UK) require us to report to you when:

-

the directors' use of the going concern basis of accounting in the preparation of the financial statements is
not appropriate; or

-

the directors have not disclosed in the financial statements any identified material uncertainties that may
cast significant doubt about the group's and company's ability to continue to adopt the going concern basis
of accounting for a period of at least twelve months from the date when the financial statements are
authorised for issue.

We have nothing to report in respect of the above matters.

However, because not all future events or conditions can be predicted, this statement is not a guarantee as to the

group's and company's ability to continue as a going concern. For example, the terms on which the United

Kingdom may withdraw from the European Union are not clear, and it is difficult to evaluate all of the potential

implications on the group's trade, customers, suppliers and the wider economy.

Reporting on other information

The other information comprises all of the information in the Annual Report other than the financial statements

and our auditors' report thereon. The directors are responsible for the other information. Our opinion on the

financial statements does not cover the other information and, accordingly, we do not express an audit opinion or,

except to the extent otherwise explicitly stated in this report, any form of assurance thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in

doing so, consider whether the other information is materially inconsistent with the financial statements or our

knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent

material inconsistency or material misstatement, we are required to perform procedures to conclude whether there

is a material misstatement of the financial statements or a material misstatement of the other information. If, based

on the work we have performed, we conclude that there is a material misstatement of this other information, we

are required to report that fact. We have nothing to report based on these responsibilities.

With respect to the Strategic Report and Report of the Directors, we also considered whether the disclosures

required by the UK Companies Act 2006 have been included.

Based on the responsibilities described above and our work undertaken in the course of the audit, ISAs (UK)

require us also to report certain opinions and matters as described below.

Strategic Report and Report of the Directors

In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic

Report and Report of the Directors for the year ended 31 December 2018 is consistent with the financial

statements and has been prepared in accordance with applicable legal requirements.

In light of the knowledge and understanding of the group and company and their environment obtained in the

course of the audit, we did not identify any material misstatements in the Strategic Report and Report of the

Directors.

Matters on which we are required to report by exception

Companies Act 2006 exception reporting

Under the Companies Act 2006 we are required to report to you if, in our opinion:

-

we have not received all the information and explanations we require for our audit; or

-

adequate accounting records have not been kept by the company, or returns adequate for our audit have not
been received from branches not visited by us; or

-

certain disclosures of directors' remuneration specified by law are not made; or

-

the company financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Responsibilities of directors

As explained more fully in the Statement of Directors' Responsibilities set out on page eight, the directors are

responsible for the preparation of the financial statements and for being satisfied that they give a true and fair

view, and for such internal control as the directors determine necessary to enable the preparation of financial

statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the directors are responsible for assessing the group's and the 's ability to

continue as a going concern, disclosing, as applicable, matters related to going concern and using the going

concern basis of accounting unless the directors either intend to liquidate the group or the or to cease operations,

or have no realistic alternative but to do so.

Auditors' responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from

material misstatement, whether due to fraud or error, and to issue an Auditors' Report that includes our opinion.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance

with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or

error and are considered material if, individually or in the aggregate, they could reasonably be expected to

influence the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located on the Financial

Reporting Council's website at www.frc.org.uk/auditorsresponsibilities. This description forms part of our

Auditors' Report.

Use of our report

This report, including the opinions, has been prepared for and only for the company's members as a body in

accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving

these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is

shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Christopher Taylor (Senior Statutory Auditor)

for and on behalf of PricewaterhouseCoopers LLP

Reading

30th September 2019

TURNOVER

3

91,499

69,092

Cost of sales

59,900

46,390

GROSS PROFIT

31,599

22,702

Administrative expenses

13,329

9,450

18,270

13,252

Other operating income

39

7

OPERATING PROFIT

18,309

13,259

Interest receivable and similar income

6

329

402

18,638

13,661

Amounts (written back) /

written off investments

7

(11

)

51

18,649

13,610

Interest payable and similar expenses

8

728

-

PROFIT BEFORE TAXATION

9

17,921

13,610

Tax on profit

11

3,575

2,527

PROFIT FOR THE FINANCIAL YEAR

14,346

11,083

OTHER COMPREHENSIVE INCOME

Retranslation of foreign subsidiaries

337

(148

)

Income tax relating to other
comprehensive income

-

OTHER COMPREHENSIVE INCOME
FOR THE YEAR, NET OF INCOME
TAX

337

(148

)

TOTAL COMPREHENSIVE INCOME
FOR THE YEAR

14,683

10,935

Profit attributable to:

Owners of the parent

14,346

11,083

Total comprehensive income attributable to:

Owners of the parent

14,683

10,885

Non-controlling interests

-

50

14,683

10,935

FIXED ASSETS

Intangible assets

13

15,156

-

Tangible assets

14

2,262

1,237

Investments

15

-

17,418

1,237

CURRENT ASSETS

Stocks

16

983

1,765

Debtors

17

37,210

32,988

Cash at bank and in hand

13,308

17,429

51,501

52,182

CREDITORS

Amounts falling due within one year

18

21,586

20,809

NET CURRENT ASSETS

29,915

31,373

TOTAL ASSETS LESS CURRENT
LIABILITIES

47,333

32,610

PROVISIONS FOR LIABILITIES

21

40

-

NET ASSETS

47,293

32,610

CAPITAL AND RESERVES

Called up share capital

22

20

Share premium

23

90

Retained earnings

23

47,183

32,500

SHAREHOLDERS' FUNDS

47,293

32,610

The financial statements were approved by the Board of Directors on 30th September 2019 and were signed on its

behalf by:

Mr J A Comery - Director

FIXED ASSETS

Intangible assets

13

-

Tangible assets

14

1,444

710

Investments

15

22,307

447

23,751

1,157

CURRENT ASSETS

Stocks

16

943

1,765

Debtors

17

26,294

26,066

Cash at bank and in hand

5,071

16,127

32,308

43,958

CREDITORS

Amounts falling due within one year

18

18,159

17,304

NET CURRENT ASSETS

14,149

26,654

TOTAL ASSETS LESS CURRENT
LIABILITIES

37,900

27,811

CAPITAL AND RESERVES

Called up share capital

22

20

Share premium

23

90

Retained earnings

23

37,790

27,701

SHAREHOLDERS' FUNDS

37,900

27,811

Company's profit for the financial year

10,089

2,695

The financial statements were approved by the Board of Directors on 30th September 2019 and were signed on its
behalf by:

Mr J A Comery - Director

Called up

share

Retained

Share

capital

earnings

premium

£'000

Balance at 1st January 2017

20

21,565

90

Changes in equity

Profit for the year

-

11,083

-

Other comprehensive income

-

(148

)

-

Total comprehensive income

-

10,935

-

Balance at 31st December 2017

20

32,500

90

Changes in equity

Profit for the year

-

14,346

-

Other comprehensive income

-

337

-

Total comprehensive income

-

14,683

-

Balance at 31st December 2018

20

47,183

90

Non-controlling

Total

interests

equity

£'000

Balance at 1st January 2017

21,675

(50

)

21,625

Changes in equity

Profit for the year

11,083

-

11,083

Other comprehensive income

(148

)

50

(98

)

Total comprehensive income

10,935

50

10,985

Balance at 31st December 2017

32,610

-

32,610

Changes in equity

Profit for the year

14,346

-

14,346

Other comprehensive income

337

-

337

Total comprehensive income

14,683

-

14,683

Balance at 31st December 2018

47,293

-

47,293

Called up

share

Retained

Share

Total

capital

earnings

premium

equity

£'000

Balance at 1st January 2017

20

25,006

90

25,116

Changes in equity

Total comprehensive income

-

2,695

-

2,695

Balance at 31st December 2017

20

27,701

90

27,811

Changes in equity

Total comprehensive income

-

10,089

-

10,089

Balance at 31st December 2018

20

37,790

90

37,900

Cash flows from operating activities

Cash generated from operations

26

6,458

18,913

Tax paid

(2,376

)

(2,658

)

Net cash from operating activities

4,082

16,255

Cash flows from investing activities

Purchase of subsidiary

(17,399

)

-

Purchase of tangible fixed assets

(1,133

)

(289

)

Interest received

329

45

Net cash from investing activities

(18,203

)

(244

)

Cash flows from financing activities

Amounts repaid from group undertakings

10,000

(10,245

)

Net cash from financing activities

10,000

(10,245

)

(Decrease)/increase in cash and cash equivalents

(4,121

)

5,766

Cash and cash equivalents at beginning
of year

27

17,429

11,663

Cash and cash equivalents at end of
year

27

13,308

17,429

1.	STATUTORY INFORMATION

MacDonald Humfrey (Automation) Limited is a private company, limited by shares, registered in England

and Wales. The company's registered number and registered office address can be found on the Company

Information page.

The principal activity of the company and the group is focused around systems integration and offering

clients a full turnkey service from top end computer systems through to shop floor implementation and full

service support.

2.	ACCOUNTING POLICIES

Basis of preparing the financial statements

These financial statements have been prepared in accordance with Financial Reporting Standard 102 "The

Financial Reporting Standard applicable in the UK and Republic of Ireland" and the Companies Act 2006.

The financial statements have been prepared, on a going concern basis, under the historical cost convention

as modified by the revaluation of certain financial instruments at fair value through profit and loss. The

group has early adopted the 2017 triennial review amendments for the accounting period beginning on 1

January 2018.

Financial Reporting Standard 102 - reduced disclosure exemptions

The company has taken advantage of the following disclosure exemptions in preparing these financial

statements, as permitted by FRS 102 "The Financial Reporting Standard applicable in the UK and Republic

of Ireland":

-

the requirements of Section 7 Statement of Cash Flows;

-

the requirement of Section 3 Financial Statement Presentation paragraph 3.17(d);

-

the requirements of Section 11 Financial Instruments paragraphs 11.41(b), 11.41(c), 11.41(e),
11.41(f), 11.42, 11.44, 11.45, 11.47, 11.48(a)(iii), 11.48(a)(iv), 11.48(b) and 11.48(c).

Basis of consolidation

The consolidated financial statements incorporate the financial statements of the company and all group

undertakings. These are adjusted, where appropriate, to conform to group accounting policies. The results

of companies acquired or disposed of are included in the profit and loss account after or up to the date that

control passes respectively.

Critical accounting estimates and assumptions

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance

sheet date, that may have a significant risk of causing a material adjustment to the carrying values of assets

and liabilities within the next financial year, are discussed below:

Contract recoverables

To assess turnover and profit on long-term contracts the directors need to determine if the final outcome

can be assessed with reasonable certainty and any profit or loss included is calculated by reference to

estimated revenue and costs to completion. The estimated cost to completion is reviewed and updated once

a quarter with the project manager on the material contracts at each quarter end. At the review exceptional

additions and contract variations are taken into account when estimating the cost to completion. Contract

reviews that estimate a loss on completion, the loss is recognised in full on identification.

Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable and represents the amount

receivable for goods supplied or services rendered, net of returns, discounts and rebates allowed by the

company and value added taxes. Where contracts involve multiple elements, the individual elements are

assessed separately.

Where the consideration receivable in cash or cash equivalents is deferred, and the arrangement constitutes

a financing transaction, the fair value of the consideration is measured as the present value of all future

receipts using the imputed rate of interest.

The company recognises revenue when (a) the significant risks and rewards of ownership have been

transferred to the buyer; (b) the company retains no continuing involvement or control over the goods; (c)

it is probable that future economic benefits will flow to the entity as described below:

Turnover and profit on long-term contracts is taken as the work is carried out if the final outcome can be

assessed with reasonable certainty. The profit included is calculated to reflect the proportion of the work

carried out at the year end, by recording turnover and related costs as contract activity progresses. Turnover

is calculated as that proportion of total contract value which costs incurred to date bear to total expected

costs for that contract. Turnover derived from variations on contracts are recognised only when they have

been accepted by the customer. Full provision is made for losses on all contracts in the year in which they

are first foreseen. When the final outcome is not certain, which may be where the deliverable is bespoke

nature or in a different field, recognition of revenue may be deferred until it is clear that all economic

benefit has been transferred.

Turnover which has been earned but not yet invoiced appears as amounts recoverable on long term

contracts on the balance sheet. The amount by which payments on account exceed turnover is included in

creditors.

Interest income

Interest income is recognised using the effective interest method.

Intangibles

The group has applied the 2017 triennial review amendment to not split out potentially identifiable

intangible assets from the goodwill as they are not considered to be separable.

Positive purchased goodwill arising on acquisitions is capitalised, classified as an asset on the Balance

Sheet and amortised over its estimated useful life up to a maximum of 20 years. This length of time is

presumed to be the maximum useful life of purchased goodwill because it is difficult to make projections

beyond this period. Goodwill is reviewed for impairment at the end of the first full financial year following

each acquisition and subsequently as and when necessary if circumstances emerge that indicate that the

carrying value may not be recoverable.

Tangible fixed assets

Depreciation is provided at the following annual rates in order to write off each asset over its estimated

useful life.

Short leasehold

-

over the remaining period of the lease

Plant and machinery

-

20% on reducing balance

Fixtures, fittings and equipment

-

20% on reducing balance

Motor vehicles

-

25% on reducing balance

Tangible fixed assets are measured at cost less accumulated depreciation.

Stocks

Stocks are valued at the lower of cost and net realisable value, after making due allowance for obsolete and

slow moving items.

Costs is determined as the individual cost segregated for specific projects. Costs include the purchase price

and transport costs directly attributable to bringing the stock to its present location and condition.

At the end of each reporting period stocks are accessed for impairment. If an item of stock is impaired, the

identified stock item is reduced to its selling price less cost to sell. An impairment charge is recognised in

the profit and loss account.

Financial instruments

The company has chosen to adopt Sections 11 and 12 of FRS 102 in respect of financial instruments.

Basic financial assets and liabilities, including trade and other debtors, bank balances, trade and other

creditors and loans from fellow group companies are recognised at amortised cost.

Derivatives, including forward foreign exchange rate contracts, are not basic financial instruments.

Non-basic financial instruments are initially recognised at fair value on the date the contract is entered into

and are subsequently re-measured to their fair value at the year end date. Changes in fair value is

recognised in profit or loss in finance income or costs as appropriate.

Taxation

Taxation for the year comprises current and deferred tax. Tax is recognised in the Consolidated Statement

of Comprehensive Income, except to the extent that it relates to items recognised in other comprehensive

income or directly in equity.

Current or deferred taxation assets and liabilities are not discounted.

Current tax is recognised at the amount of tax payable using the tax rates and laws that have been enacted

or substantively enacted by the balance sheet date.

Deferred tax

Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the

balance sheet date.

Timing differences arise from the inclusion of income and expenses in tax assessments in periods different

from those in which they are recognised in financial statements. Deferred tax is measured using tax rates

and laws that have been enacted or substantively enacted by the year end and that are expected to apply to

the reversal of the timing difference.

Unrelieved tax losses and other deferred tax assets are recognised only to the extent that it is probable that

they will be recovered against the reversal of deferred tax liabilities or other future taxable profits.

Research and development

Expenditure on research and development is written off in the year in which it is incurred.

Foreign currencies

Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling at the

balance sheet date. Transactions in foreign currencies are translated into sterling at the rate of exchange

ruling at the date of transaction. Exchange differences are taken into account in arriving at the operating

result.

The assets and liabilities of overseas subsidiary undertakings are translated into sterling at the rates of

exchange ruling at the balance sheet date. Income and expenses of each statement of comprehensive

income are translated at an average exchange rate for the period. All resulting exchange differences are

recognised in other comprehensive income.

Operating lease commitments

Rentals paid under operating leases are charged to profit or loss on a straight line basis over the period of

the lease.

Pension costs and other post-retirement benefits

The group operates a defined contribution pension scheme. Contributions payable to the group's pension

scheme are charged to profit or loss in the period to which they relate.

Investment - company

Investment in a subsidiary company is held at cost less accumulated impairment losses.

3.

TURNOVER

The turnover and profit before taxation are attributable to the one principal activity of the group.

An analysis of turnover by geographical market is given below:

2018

2017

£'000

United Kingdom

56,767

21,744

North and South America

21,378

24,622

Rest of the world

13,354

22,726

91,499

69,092

4.	EMPLOYEES AND DIRECTORS

2018

2017

£'000

Wages and salaries

18,789

16,029

Social security costs

1,958

1,848

Other pension costs

1,452

1,387

22,199

19,264

The average number of employees during the year was as follows:

2018

2017

Directors

6

Administrative staff

60

39

Design and manufacture

336

281

402

326

5.	DIRECTORS' EMOLUMENTS

2018

2017

£

Directors' remuneration

157,445

Directors' pension contributions to money purchase schemes

7,114

The number of directors to whom retirement benefits were accruing was as follows:

Money purchase schemes

1

Director's paid by other group undertakings and are not recharged to the company. The directors are

considered to be key management.

6.

INTEREST RECEIVABLE AND SIMILAR INCOME

2018

2017

£'000

Bank interest receivable

-

8

Other interest receivable

329

37

Gain on financial instrument

-

357

329

402

7.	AMOUNTS (WRITTEN BACK) /

WRITTEN OFF INVESTMENTS

2018

2017

£'000

Minority interest balance (written back) /
written off

(11

)

51

8.

INTEREST PAYABLE AND SIMILAR EXPENSES

2018

2017

£'000

Loss on financial instrument

728

-

9.	PROFIT BEFORE TAXATION

The profit is stated after charging:

2018

2017

£'000

Hire of plant and machinery

280

180

Other operating leases

1,156

1,162

Depreciation - owned assets

461

355

Loss on disposal of fixed assets

6

-

Goodwill amortisation

183

-

Research and development costs

637

680

Foreign exchange differences

104

86

10.	AUDITORS' REMUNERATION

2018

2017

£'000

Fees payable to the company's auditors for the audit of the company and
consolidated financial statements

140

85

Fees payable to the company's auditors for the audit of the subsidiaries financial
statements

27

40

11.

TAXATION

Analysis of the tax charge

The tax charge on the profit for the year was as follows:

2018

2017

£'000

Current tax:

UK corporation tax

3,355

2,511

Adjustment to tax charge in

respect of previous periods

229

16

Total current tax

3,584

2,527

Deferred tax

(9

)

-

Tax on profit

3,575

2,527

Reconciliation of total tax charge included in profit and loss

The tax assessed for the year is higher than the standard rate of corporation tax in the UK. The difference is

explained below:

2018

2017

£'000

Profit before tax

17,921

13,610

Profit multiplied by the standard rate of corporation tax in the UK of 19
% (2017 - 19 %)

3,405

2,586

Effects of:

Expenses not deductible for tax purposes

1

13

Depreciation in excess of capital allowances

55

33

Utilisation of tax losses

-

(212

)

Adjustments to tax charge in respect of previous periods

229

16

Research and development relief

(224

)

-

Charged at different tax rates

109

75

Losses carried forward

-

16

Total tax charge

3,575

2,527

Tax effects relating to effects of other comprehensive income

2018

Gross

Tax

Net

£'000

Retranslation of foreign subsidiaries

337

-

337

2017

Gross

Tax

Net

£'000

Retranslation of foreign subsidiaries

(148

)

-

(148

)

The tax rate for the current year is lower than the prior year, due to changes in the UK corporation tax rate,

which decreased from 20% to 19% from 1st April 2017. Changes to the UK corporation tax rates were

substantively enacted as part of Finance Bill 2016 (on 6th September 2016). These include reductions to

the main rate to reduce the rate to 17% from 1st April 2020. Deferred taxes at the balance sheet date have

been measured using these enacted tax rates and reflected in these financial statements.

12.	INDIVIDUAL STATEMENT OF COMPREHENSIVE INCOME

As permitted by Section 408 of the Companies Act 2006, the Statement of Comprehensive Income of the

parent company is not presented as part of these financial statements.

13.	INTANGIBLE FIXED ASSETS

Group

Goodwill

£'000

COST

Additions (note 28)

15,339

At 31st December 2018

15,339

AMORTISATION

Amortisation for year

183

At 31st December 2018

183

NET BOOK VALUE

At 31st December 2018

15,156

14.	TANGIBLE FIXED ASSETS

Group

Fixtures,

fittings

Short

Plant and

and

Motor

leasehold

machinery

equipment

vehicles

Totals

£'000

COST

At 1st January 2018

734

702

2,828

204

4,468

Additions

829

10

294

-

1,133

Disposals

(1

)

-

(32

)

(33

)

Transfer on acquisition

146

613

183

44

986

At 31st December 2018

1,708

1,325

3,305

216

6,554

DEPRECIATION

At 1st January 2018

502

503

2,063

163

3,231

Charge for year

189

65

197

10

461

Eliminated on disposal

-

(27

)

(27

)

Transfer on acquisition

97

364

137

29

627

At 31st December 2018

788

932

2,397

175

4,292

NET BOOK VALUE

At 31st December 2018

920

393

908

41

2,262

At 31st December 2017

232

199

765

41

1,237

Company

Fixtures,

fittings

Short

Plant and

and

Motor

leasehold

machinery

equipment

vehicles

Totals

£'000

COST

At 1st January 2018

-

303

2,258

188

2,749

Additions

829

8

200

-

1,037

Disposals

-

(32

)

(32

)

At 31st December 2018

829

311

2,458

156

3,754

DEPRECIATION

At 1st January 2018

-

240

1,645

154

2,039

Charge for year

118

15

158

7

298

Eliminated on disposal

-

(27

)

(27

)

At 31st December 2018

118

255

1,803

134

2,310

NET BOOK VALUE

At 31st December 2018

711

56

655

22

1,444

At 31st December 2017

-

63

613

34

710

15.	INVESTMENTS

Company

Shares in

group

undertakings

£'000

COST

At 1st January 2018

447

Additions

28,860

Impairment loss in year

(7,000

)

At 31st December 2018

22,307

NET BOOK VALUE

At 31st December 2018

22,307

At 31st December 2017

447

The additions during the year was the purchase of the new subsidiary C.K. Industrial Engineering Limited

and additional capital paid into Exmac Automation Limited and MacDonald Humfrey (Automation) India

Private Limited.

Subsidiary undertaking

Class of
share

Held by
the
company

Registered office

ExMac Automation Limited

Ordinary

100%

29-35 Bolton Road, Luton, Beds., LU1
3HY

MacDonald Humfrey
(Automation) SEA PTE. Limited

Ordinary

100%

60 Kaki Bukit Place, #08-13, Eunos
Techpark, Singapore, 415979

MacDonald Humfrey Automation
Middle East Control Systems
LLC

Ordinary

49%

Office 306, 3rd Floor, Arjan Emrates
Building, Defense Road, Abu Dhabi,
UAE, P.O. Box 127557

MacDonald Humfrey
(Automation) India Private
Limited

Ordinary

99.99%

A-2, Gruhlaxmi Apartments, 415/1,
Somwar Peth near Rasta Peth MSEB
Office, Pune, MH 411011, India

C. K. Industrial Engineering

Ordinary

100%

4-6 Enterprise Way, Wickford Business

Limited

B Ordinary

100%

Park, Wickford, Essex, SS11 8DH

The company hold 100% of the voting and distribution rights of MacDonald Humfrey Automation Middle

East Control Systems LLC.

MHA-Stopford Limited was dissolved on 6th March 2018.

Exmac Automation Limited, company number 06758287, has taken the exemption from audit under

Section 479A of the Companies Act 2006 for the year ended 31st December 2018.

16.

STOCKS

Group

Company

2018

2017

2018

2017

£'000

Stocks

983

1,765

943

1,765

An impairment loss of £270,000 (2017 - £350,000) was recognised in cost of sales during the year due to

wear and tear on trial equipment.

Stock recognised in cost of sales during the year as an expenses was £1,182,000 (2017 - £2,218,000).

17.

DEBTORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Group

Company

2018

2017

2018

2017

£'000

Trade debtors

16,348

12,777

8,742

11,490

Amounts owed by group undertakings

3,760

11,127

10,160

10,102

Amounts recoverable on contract

16,493

8,515

6,923

4,076

Other debtors

609

212

469

41

Derivatives

-

357

-

357

37,210

32,988

26,294

26,066

Amounts owed by group undertakings in the previous year included a loan of £10 million which unsecured

and interest accrued at LIBOR plus 2.15%. All other monies are unsecured, interest free and repayable on

demand.

18.

CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Group

Company

2018

2017

2018

2017

£'000

Payments on account

5,410

7,552

4,904

7,200

Trade creditors

3,299

3,792

1,805

2,428

Amounts owed to group undertakings

1,189

881

3,859

3,844

Corporation tax

3,072

923

1,053

506

Social security and other taxes

653

440

470

367

VAT

217

39

341

233

Other creditors

2,359

5,848

1,558

1,772

Derivatives

371

-

371

-

Accruals

5,016

1,334

3,798

954

21,586

20,809

18,159

17,304

Amounts owed by group undertakings are interest free, unsecured and repayable on demand.

19.	LEASING AGREEMENTS

Minimum lease payments fall due as follows:

Group

Non-cancellable

operating leases

2018

2017

£'000

Within one year

779

597

Between one and five years

929

445

In more than five years

318

-

2,026

1,042

Company

Non-cancellable

operating leases

2018

2017

£'000

Within one year

541

434

Between one and five years

393

347

934

781

20.	FINANCIAL INSTRUMENTS

Group

2018

2017

£'000

Financial assets at fair value through profit and loss

-

357

Financial liabilities at fair value through profit and loss

(371

)

-

Financial assets that are debt instruments measured at amortised cost

32,841

21,291

Financial liabilities measured at amortised cost

(10,673

)

(10,972

)

FINANCIAL INSTRUMENTS - continued

The group enters into forward foreign currency contracts to mitigate the exchange rate risk for certain

foreign currency customers. At the balance sheet date the outstanding contracts mature by September 2019

(2017 - September 2019). The group is committed to selling 46,009,888 AED (2017 - 60,734,380 AED) for

a fixed amount of sterling at the balance sheet date.

These have been fair valued using observable forward exchange rates and interest rates corresponding to

the maturity of the contract.

21.	PROVISIONS FOR LIABILITIES

Group

2018

2017

£'000

Deferred tax

40

-

Group

Deferred

tax

£'000

Credit to Statement of Comprehensive Income during year

(9

)

Balance on acquisition

49

Balance at 31st December 2018

40

22.	CALLED UP SHARE CAPITAL

Allotted, issued and fully paid:

Number:

Class:

Nominal

2018

2017

value:

£

10,000

Ordinary 'A'

£1

10,000

Ordinary 'B'

£1

10,000

3,945

Ordinary 'C' non-voting

1p

39

2,400

Ordinary 'D' non-voting

1p

24

20,063

Ordinary A and B shares are non-redeemable share capital, have full voting rights (where one share is one

vote) and rights to distributions of profits by way of dividend (including on winding up).

Ordinary C and D shares are non-redeemable share capital, carry no voting rights on written resolutions or

at general meetings. There is no right to distributions from profits, except where a distribution is in excess

of £500,000 then they rank pari passu with Ordinary A and B shares. There is no right to distributions

where a company is wound up.

23.

RESERVES

Retained earnings includes all current and prior year periods retained profits and losses attributable to the

group.

Share premium includes any premiums received on issue of share capital, less any transactions costs

associated with the issuing of those shares.

24.	RELATED PARTY DISCLOSURES

The company has taken advantage of exemption, under the terms of Financial Reporting Standard 102 'The

Financial Reporting Standard applicable in the UK and Republic of Ireland', not to disclose related party

transactions with wholly owned subsidiaries within the group.

Transactions between group entities which have been eliminated on consolidation are not disclosed within

the financial statements.

Other related parties (under common influence)

2018

2017

£'000

Rent paid

479

Amount due to related party

-

148

25.	ULTIMATE CONTROLLING PARTY

The parent undertaking is L-3 Communications UK Limited. The registered office is 100 New Bridge

Street, London, EC4V 6JA.

On 29th June 2019, L3 Technologies, Inc. merged with Harris Corporation, Inc to form L3Harris

Technologies, Inc. which is now the ultimate parent undertaking and controlling party. L3Harris

Technologies, Inc., a company incorporated in the United States of America.

The consolidated financial statements of L3 Technologies, Inc. may be obtained from the company

secretary, L-3 Technology & Services UK Limited, Sigma Close, Shannon Way, Tewkesbury,

Gloucestershire, GL20 8ND.

26.	RECONCILIATION OF PROFIT BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

2018

2017

£'000

Profit before taxation

17,921

13,610

Depreciation charges

461

355

Loss on disposal of fixed assets

6

Amounts written off investments

-

51

Amortisation charge

183

-

Foreign operations retranslation

339

(143

)

Finance costs

728

-

Finance income

(329

)

(402

)

19,309

13,477

Decrease/(increase) in stocks

822

(1,471

)

(Increase)/decrease in trade and other debtors

(10,536

)

4,043

(Decrease)/increase in trade and other creditors

(3,137

)

2,864

Cash generated from operations

6,458

18,913

27.	CASH AND CASH EQUIVALENTS

The amounts disclosed on the Cash Flow Statement in respect of cash and cash equivalents are in respect of

these Balance Sheet amounts:

Year ended 31st December 2018

31.12.18

1.1.18

£'000

Cash and cash equivalents

13,308

17,429

Year ended 31st December 2017

31.12.17

1.1.17

£'000

Cash and cash equivalents

17,429

11,663

28.	BUSINESS COMBINATIONS

Group

On 18th September 2018, the group acquired control of C. K. Industrial Engineering Limited through the

purchase of 100% of the share capital for total consideration of £20,972,958. C. K. Industrial Engineering

Limited design and manufacture automotive tooling for large automotive manufacturers.

Management have estimated the useful life of the goodwill to be 20 years. The goodwill arising from the

acquisition is attributable to the skilled work force and the customer base.

The following table summarises the consideration paid by the group, the fair value of assets acquired and

the liabilities assumed at the acquisition date.

Consideration at 18th September 2018:

£'000

Cash

20,853

Directly attributable costs

120

Total consideration

20,973

For cash flow disclosure purposes the amounts are disclosed as follows:

£'000

Cash consideration

20,853

Directly attributable costs

120

20,973

Less: Cash acquired

(3,574

)

Net cash outflow

17,399

Recognised amounts of identifiable assets acquired and liabilities assumed:

Notes

Book values

Adjustments

Fair value

£'000

Property, plant and equipment

359

-

359

Stock

40

-

40

Trade and other receivables

a / b

5,374

(953

)

4,421

Cash

b

3,124

450

3,574

Trade and other payables

c / d / e

(1,957

)

(743

)

(2,700

)

Deferred tax liability

(60

)

-

(60

)

Total identifiable net assets

6,880

(1,246

)

5,634

Goodwill

15,339

Total

20,973

BUSINESS COMBINATIONS - continued

The adjustments arising on acquisition were in respect of the following:

(a)

An impairment charge in respect of certain of the acquired accounts receivables and amounts
recovered on contracts.

(b)

Short-term deposit reclassification from other debtors to cash.

(c)

A provision for liability in respect of employee holiday pay and previously unrecorded expenses.

(d)

Recognition of an estimated liability in respect of research and development tax credits.

(e)

Recognition of a dilapidation liability.

The revenue from C. K. Industrial Engineering Limited included in the consolidated income statement for

2018 was £3,027,000. C. K. Industrial Engineering Limited contributed profit of £209,000 over the same

period.